Administration releases final Medicare regulations for ACOs

Kaiser Health NewsOctober 20, 2011 

WASHINGTON — The Obama administration Thursday released its much-awaited final rule for Medicare for accountable care organizations, or ACOs, which make it easier for doctors and hospitals to participate by cutting in half the number of performance measurements, removing the electronic health records requirement and eliminating financial risks for some groups.

The Centers for Medicare and Medicaid Services also relaxed the timetable for the launch of the ACOs, with groups allowed to apply throughout 2012.

A move to ACOs has been seen as one of the most promising new models of delivering health care, since it would reward doctors and hospitals for providing high-quality care to Medicare beneficiaries while keeping costs down.

Today, hospitals and doctors generally get paid more for delivering more care, not necessarily better care. ACOs aim to improve care and to save money by having doctors, hospitals and other providers better coordinate their services to, among other things, reduce unnecessary emergency room use and reduce hospital readmissions.

The provision's inclusion in the 2010 health care law sparked a frenzied race by providers to join in as quickly as possible. But when the proposed regulation for the program was announced in March, excitement fizzled.

CMS officials hope the final rule, which runs 696 pages, will restore interest among many skittish provider groups.

Some experts agree. Michael Millenson, president of Health Quality Advisors LLC, compared the ACO announcement to a card game. The initial proposed regulations, he said, "were too complicated, the money wasn't very good and the cost to enter the game was way too high. What they've done in the final rule is they've simplified the rules, they've sweetened the pot and they've opened up a few new chairs."

Regulators estimate that between 50 and 270 ACOs would be formed in the next three years, affecting the care of 2 million of the 47 million Medicare beneficiaries.

Medicare beneficiaries will be assigned to an ACO based on who their doctor is. If a patient's doctor is part of an ACO, that patient is automatically included, although the beneficiaries can choose to not be included by opting to keep their records outside the ACO system.

Unlike beneficiaries in Medicare HMOs, patients in ACOs are free to visit any health care provider, just as they are in the traditional Medicare program.

To entice providers, CMS said it will make $170 million available starting next year to physician-owned and rural providers to start ACOs.

Also Thursday, the Justice Department and the Federal Trade Commission released their final policy statement on ACOs and antitrust issues. The new policy reduces the number of ACO collaborations of doctors and hospitals that will be subject to an antitrust review. But CMS encouraged that provider groups voluntarily seek a Justice Department opinion.

The administration made several concessions to the health industry in the final rule announced Thursday.

Among the key changes:

_ Providers will be able to participate in an ACO and share in savings with Medicare without risk of losing money. ACOs will be able to start sharing in the savings earlier rather than letting Medicare retain all the initial savings.

_ The number of quality measures that ACOs will have to meet to qualify for performance bonuses was reduced from 65 to 33.

_ The ACOs will also be told up-front which Medicare beneficiaries are likely to be part of their system. Under the earlier rule, ACOs would not know which patients were in the ACO until their contract ended.

_ Community health centers and rural health clinics will be allowed to lead ACOs. They were left out of the prior proposal.

Actuaries for CMS anticipate that the program could save Medicare $940 million over four years — a drop in the bucket compared to the $2 trillion Medicare anticipates spending during this period. ACO proponents, however, hope that the new organizations will proliferate and be expanded both for Medicare beneficiaries and privately insured patients.

"Accountable care organizations can represent a major step forward in transforming Medicare ... so it can help assure high quality seamless and less costly care," Dr. Donald Berwick, the CMS administrator, said in a conference call with reporters. "This is not just about Medicare. ACOs can be a step forward for the whole health system."

When administration officials released their preliminary rule last spring, hospital and doctor groups complained that the program created more financial risks than rewards and imposed onerous reporting requirements. The American Medical Group Association, which represents nearly 400 large provider organizations, told CMS officials in a letter that more than 90 percent of its members would not participate. In particular, industry groups objected to a provision in the proposed rule that would impose penalties for ACOs that do not achieve savings.

But George Roman, senior director of health policy at the association, said that although he had not read the full rule, he is "cautiously optimistic." The changes are "music to my ears. These are changes that are good. We asked for almost all of these things."

(Kaiser Health News is an editorially independent news service of the Kaiser Family Foundation, a nonpartisan health care policy organization that isn't affiliated with Kaiser Permanente.)


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